Electricity Hikes to Promote Solar Power?

A common argument for solar power and sustainable building is that
they protect utility customers from the inevitability of rising fossil
fuel electricity costs. Renewable energy by nature does not become
scarce and, once installation is complete and paid for, is free and
abundant for the life of the system. So the volatility of grid
electricity costs and the relative stability of home solar power has
been a big plus for the fledgling solar energy movement. But a recent decision
by the Los Angeles Department of Water and Power (DWP) to raise
electricity costs as an incentive for solar power and energy efficiency
is to my knowledge the first of its kind.

The rate hike is intended to help pay for Mayor Villaraigosa’s aggressive solar plan
for the city, as well as more intensive conservation programs. At the
same time, the hope is that higher rates will make solar power a more
appealing option for local homeowners. Those prices will rise between
8.8 and 28.4 percent.

The smallest users of DWP electricity, Tier 1 customers, can expect
an average increase of $3.41 per month, or 8.8 percent on their
electric bills. 58 percent of DWP’s residential customers are Tier 1.
36 percent are Tier 2 customers and can expect about an 18 percent
increase equaling about $15 per month. LA’s heaviest power users will
take the largest hit; between 24.4 and 28.4 percent.

Los Angeles plans to get 20 percent of its electricity from wind and
solar power by the end of 2010, and Mayor Villaraigosa believes the
rate hikes will ensure that the city meets those goals. The Mayor and
DWP admit that the rate increase is big but also overdue and necessary
to adequately promote renewable energy in the short term.

The Los Angeles Times
gives one example of an LA area homeowner that has used solar power to
shield his household from these and other rate hikes. Ray Wyman Jr. of
Orange County installed a 4.2-kW system, leased zero-down from SolarCity,
and his electric bill decreased from a high of $180 to a new high of 92
cents. Of course, those numbers do not include Wyman’s $95 monthly
lease payment to SolarCity, but he is still saving considerably overall
and has from day one. Furthermore, that monthly payment is locked in
for 15 years and Wyman expects a check after one year from DWP for
excess solar energy produced during the summer.

The new rate increases combined with local, state and federal tax incentives and rebates for home solar power
may help Mayor Villaraigosa and DWP achieve their renewable energy
goals and really kick-start solar power in Los Angeles. If it does, it
may also spread the notion, at least among municipal utilities, that
raising rates can be done strategically to promote renewable energy.